Countdown to quota elimination

NEW YORK — Hanging like a cloud over 2005 — and raising the hackles of big textiles producers — is the scheduled Jan. 1 elimination of textiles quotas between the United States and low-cost exporting nations, with China looming largest of all.

What does it all mean? A panel of textiles executives thrashed out the issue at a January seminar sponsored by Financo Inc. — a retail and textiles industry financial consultant — at its annual Chief Executives dinner. The participants included CEOs of Li & Fung Limited, VF Corporation, Liz Claiborne and Kellwood Company, along with the global director of Deloitte Research. Among their opinions:

Though textiles quotas are set to lapse in 2005, those plans are likely to be shelved amid a hotly contested presidential election, said William T. Fung, managing director Li & Fung Ltd., the $4.8 billion Hong Kong-based company that recently snagged the Royal Velvet license. If the quotas do disappear on schedule, "We will all enter into a turbulent, uncertain period," Fung said. "It means there will be chaos. Total chaos."
But given the current political environment, that's not a realistic scenario, said Fung. "The question is, will the United States government act to stop the surge of Chinese textile imports, and I am inclined to think they will."Even if quotas disappear on schedule in 2005 — and he's not certain they will — Mackey McDonald, chairman and CEO of VF Corp., parent of Wrangler jeans, said he's not expecting a flood of textile imports into the United States.China has rapidly become "the world's factory," seizing the smoke-stack operations of more highly developed countries, notably the United States, and sending back a torrent of low-cost imports, said Ira Kalish, global director, Deloitte Research.When it comes to sourcing in a quota-free world, said W. Lee Capps III, president of operating services, Kellwood Co., "Remember that import limits will be removed in January — kind of." The reality is that "a sourcing strategy should be based on some restrictions continuing."